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The FAILURE to control the pandemic in the Philippines has made the country’s economic recovery uncertain, according to the World Bank’s October 2020 Economic Update for East Asia and the Pacific report.
The Washington-based lender said the Philippine economy could worsen to a 9.9 percent contraction this year from the initial contraction of 6.9 percent. Next year, the Bank said, the economy could register growth of just 2.9 percent if global growth remains anemic in 2021; otherwise, GDP could reach 5.3 percent growth due to low base effects.
With the pandemic and economic uncertainty, the World Bank projects that poverty will rise to 22.4 percent this year using a poverty line of $ 3.2 per day.
“Indonesia and the Philippines face uncertain prospects. The two most populous countries in the region after China have so far failed to control the pandemic, ”the report indicates.
“Indonesia has not imposed strict blockades and appears to rely on softer measures, while
The Philippines has entered a cycle of repeated strict closures and reopens, ”he added.
The World Bank said that while the Philippines, like Indonesia, could take advantage of its young population, it suffers from a “large informal sector and poor living conditions for a large part of its population.”
The World Bank also expects the Philippines to be hit harder by the crisis than Indonesia because of its exposure to the global economy.
The World Bank’s chief economist in the Philippines, Rong Qian, said the country relies much more on tourism and exports compared to Indonesia. This means that the Philippines’ economic recovery is also dependent on the recovery of its trading partners and the global economy.
“The downside scenario is the risk of reversion to a strict lockdown and a slower recovery or a deeper recession in the world economy,” Qian told a news conference on Tuesday.
Poverty
According to the latest World Bank Macroeconomic Poverty Outlook for the Philippines, the key domestic risk in the country “remains uncontrolled transmission of Covid-19,” which may lead to tighter quarantine restrictions and a decline in domestic consumption.
For this year, the incidence of poverty in the country could reach 22.4 percent from the estimated 20.5 percent in 2019. This is based on the lower-middle-income poverty rate of $ 3.2 per day. established by the World Bank using estimates of purchasing power parity (PPP).
The World Bank said poverty could remain high until next year, albeit at a lower rate of 21.4 percent, before slowing further to 20.4 percent in 2022.
These estimates may be consistent with the World Bank’s expectations that the Philippine economy will return to its pre-pandemic shape by the end of 2021.
The OECD explained that PPPs are currency conversion rates that attempt to equalize the purchasing power of different currencies, eliminating differences in price levels between countries.
The Philippine Statistics Authority (PSA) does not use PPPs to calculate poverty. The government uses a poverty threshold which is the minimum income / expenditure required for a family / individual to meet the basic food and non-food requirements.
Basic dietary requirements are currently based on a 100 percent adequacy for the Recommended Energy and Nutrient Intake (RENI) for protein and energy equivalent to an average of 2000 kilocalories per capita and an 80 percent adequacy for other nutrients.
On the other hand, non-food basic needs are estimated indirectly by obtaining the relationship between food expenses and total basic expenses of a reference group of families, coverage expenses.
These expenses correspond to: clothing and footwear; accommodation; fuel, light, water; minor maintenance and repairs; rental of occupied housing units; medical attention; education; transportation and communication; non-durable furniture; domestic operations; and care and personal effects.
COVID-19
The World Bank said that in the first half of 2020, the Philippine economy contracted by 9 percent, compared with growth of 5.6 percent in the same period last year.
The contraction, the Washington-based lender said, is the largest since 1985 and is driven by the implementation of strict quarantine measures including restrictions on mobility, work-from-home arrangements and work-site closures that choke off activities. economic.
The World Bank added that Philippine exports and imports also weakened as international trade plummeted, disrupted by massive disruptions in global value chains.
The impact of Covid-19, the Bank said, has pushed the economy into recession and threatened its economic and social gains.
The pandemic has led to a decline in remittances sent by Filipino workers abroad and the loss of jobs caused by strict containment measures.
Recovering from the pandemic requires effective public health management and social protection measures immediately, and resuming the government’s strong emphasis on investments in human capital and infrastructure that characterized the successful growth story of the Philippines before Covid.
“In the short term, every peso placed directly in the hands of poor and vulnerable families through social assistance translates into demand for basic goods and services in local communities, which in turn supports micro and small businesses and the government’s recovery efforts, ”said Ndiamé. Diop, World Bank Country Director for Brunei, Malaysia, the Philippines and Thailand. “At the same time, the importance of improvements in public health management, including testing, tracing, isolation and treatment, to effectively control the spread of Covid-19 and ensure a definitive recovery cannot be overstated.”
Diop added that investing in social service infrastructure and care delivery, such as the critical identification system, digital mobile access, and transaction accounts, would help ensure that social protection measures directly reach poor families and vulnerable when they need it.
Qian added that there is a need to continue the government’s infrastructure initiatives that would help boost the economy and address the country’s infrastructure limitations.
Structural reforms, Qian said, would also be necessary to improve the business environment, foster competition and boost productivity growth to enhance inclusive growth.
“In the medium term, sustaining the public infrastructure spending agenda will support economic recovery while addressing long-standing infrastructure gaps in the country,” Qian said.
“Reforms in still protected sectors such as finance, transportation and communications will equip people, government and the private sector to take advantage of emerging digital opportunities,” he added.
The World Bank Group said it will deploy up to $ 160 billion in financial support over 15 months to help more than 100 countries protect the poor and vulnerable, develop human capital, support businesses and fuel economic recovery. This includes $ 50 billion of new IDA resources through grants and concessional loans.
